Thinfilm’s new facility could churn out billions of printed chips a year

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Pipefitter Isisdro Sanchez and other workers install clean rooms at Thinfilm Electronics ASA in San Jose, Calif., Friday, March 24, 2017. Thinfilm is a pioneer in printed electronics, a process where computer chips, sensor and other electronic components are literally printed out in a process similar to that used by ink jet printers. This summer, the company plan to open a new fab in San Jose, where it plans to produce hundreds of millions of printed chips. The move could make printed electronics commonplace -- and be a boon to local manufacturing. (Patrick Tehan/Bay Area News Group)

Jon Simmons, left, director of equipment engineering, talks with David Byram as workers install clean rooms at Thinfilm Electronics ASA in San Jose, Calif., Friday, Mar. 24, 2017. Thinfilm is a pioneer in printed electronics, a process where computer chips, sensor and other electronic components are literally printed out in a process similar to that used by ink jet printers. This summer, the company plan to open a new fab in San Jose, where it plans to produce hundreds of millions of printed chips. The move could make printed electronics commonplace -- and be a boon to local manufacturing. (Patrick Tehan/Bay Area News Group)

An atomic layer deposition tool was installed as workers build clean rooms at Thinfilm Electronics ASA in San Jose, Calif., Friday, March 24, 2017. Thinfilm is a pioneer in printed electronics, a process where computer chips, sensor and other electronic components are literally printed out in a process similar to that used by ink jet printers. This summer, the company plan to open a new fab in San Jose, where it plans to produce hundreds of millions of printed chips. The move could make printed electronics commonplace -- and be a boon to local manufacturing. (Patrick Tehan/Bay Area News Group)

Pipes and valves were installed as workers build clean rooms at Thinfilm Electronics ASA in San Jose, Calif., Friday, March 24, 2017. Thinfilm is a pioneer in printed electronics, a process where computer chips, sensor and other electronic components are literally printed out in a process similar to that used by ink jet printers. This summer, the company plan to open a new fab in San Jose, where it plans to produce hundreds of millions of printed chips. The move could make printed electronics commonplace -- and be a boon to local manufacturing. (Patrick Tehan/Bay Area News Group)

Davor Sutija, CEO of Thinfilm, at the company's former offices in North San Jose. (Troy Wolverton/Bay Area News Group)

A wine bottle with a label that includes one of Thinfilm's printed NFC chips. (Troy Wolverton/Bay Area News Group)

A beer bottle with a label that includes one of Thinfilm's printed NFC
chips in a photo shot in March 2017 at the company's old headquarters in
North San Jose. The printed-electronics company plans to begin mass
producing such chips at its new, nearby facility in San Jose in the third
quarter of 2018. (Troy Wolverton/Bay Area News Group)

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This plant won’t be producing high-powered processors on slices of silicon. Instead, it’s going to be making potentially billions of low-cost chips for everyday products, and it’s going to operate much like a print shop, with rolls of flexible material being fed into machines that create electronics by depositing materials on them using techniques similar to an inkjet printer. The San Jose plant will be one of the first worldwide to move to that method.

The process developed by Thinfilm could popularize the new kind of chipmaking and revolutionize the way consumers interact with products from whiskey bottles to shavers. Thanks to the new chips from Thinfilm, you may soon be able to find out if a cosmetic container has been opened before you purchased it, whether your frozen dinner has been recalled or view a video of a brewmaster explaining how he crafted your beer — all by just tapping your phone onto a product label.

Davor Sutija, CEO of Thinfilm, at the company’s former offices in North San Jose. (Troy Wolverton/Mercury News)

For its production facility, Thinfilm, a pioneer in printed electronics, has revamped a North San Jose fab once used by Qualcomm. Although the factory’s grand opening is not until June, Thinfilm has moved in and plans to start producing chips in coming weeks. It already has 115 employees at the factory and is continuing to hire, company spokesman Bill Cummings said.

The plant comes as manufacturing jobs in Santa Clara County are on the upswing. After plummeting 41 percent between 1990 and 2010, the industry added 10,400 jobs between 2010 and 2015 — an increase of about 7 percent, according to the state’s Employment Development Department.

The plant will produce two types of products. One, called an electronic article surveillance, or EAS, tag, is often found in clothing and is used to prevent theft. The other is an NFC, or near-field communications, chip Thinfilm plans to market as a kind of smart product label that can detect whether a bottle or box has been opened. Because each chip has a unique identification number, the tags can be used to identify individual items. And they can also store small bits of information, like web addresses.

Initially Thinfilm will produce those chips just like it did at its old facility, which was nearby in North San Jose. That process involves printing chips on relatively small sheets of thin flexible materials, such as plastics and stainless steel.

It plans to be manufacturing its EAS tags using the roll-to-roll process by the fourth quarter of this year and its NFC chips by the third quarter of next year.

The move to roll-to-roll production will allow Thinfilm to increase production exponentially. At its old facility, it produced about 1 to 2 million NFC chips a month, or as many as 24 million a year. Once it has the new production line in place, it will be able to produce 5 billion a year, company officials said.

One of the big advantages of its technology is that it will cost Thinfilm much less to get its plant fully operational. The company says the plant will cost about $32 million to $34 million, compared with the billions of dollars needed for a typical chip fab.

Because of that, Thinfilm could quickly ramp up production even higher.

“Within a year or two, we could easily go from 5 billion to many tens of billions,” Sutija said. Noting that the chips industry produces about 20 billion microprocessors each year, he added, “We’ll be adding significant capacity to the world electronics industry.”

The Norway-based company is particularly enthusiastic about its NFC chips. Many phones now have NFC readers built into them that can interact with Thinfilm’s tags. By tapping their phone on one of them, consumers could find out if the product has been tampered with or whether it’s been recalled. They could also find out whether it’s authentic and potentially get more information about it or the company that produced it.

A roll of Thinfilm’s printed NFC chips. (Troy Wolverton/Mercury News)

The tags will allow everyday products to become “smart” and allow product makers to communicate directly with consumers rather than having to depend on retailers to market their products, Sutija said.

But it remains to be seen whether Thinfilm will find a market for its printed chips. Consumer product manufacturers are interested in smart labelsbut are keenly sensitive to what those will add to their costs, said Raghu Das, CEO of IDTechEx, a tech industry research firm.

Thinfilm plans to charge 12 to 15 cents per NFC chip to large customers, Cummings said. That might not seem like a lot, but it would add significantly to packaging and labeling costs of most products.

The promise of printed electronics and the ability to produce mass quantities of chips quickly at ultralow prices has tantalized the tech industry for years. But they’ve gained traction in only a few niche markets.

Following Moore’s law, traditional chipmakers have continued to find ways to cram more electronics onto silicon wafers, allowing silicon-based chips to become ever smaller, more powerful and cheaper to produce.

Meanwhile, printed electronics makers like Thinfilm have struggled to perfect their production techniques. Because printing is a much cruder technique than traditional chipmaking, the circuits it creates can’t get close to the ultrasmall sizes on traditional chips.

“The challenge that a lot of these (printed) approaches have had is that silicon is really good,” said Paul Semenza, director of commercialization at NextFlex, a public-private research consortium that’s developing techniques for producing partially printed flexible electronics.

Last year, Thinfilm lost $43.7 million on just $3.8 million in sales. Much of that loss came from adding employees to staff its new facility and developing the roll-to-roll technology. The company can hit break-evencash flow if it is able to manufacture and sell 100 million chips a month at its new facility, Sutija said.

“They’ve got a lot going,” said Randall Sherman, president of New Venture Research, a consultancy that focuses on advanced electronics technologies. “But they’re burning through their money.”

He added: “It’s do or die now.”

But you can count the city of San Jose among Thinfilm’s believers. Mayor Sam Liccardo’s office helped the company secure the old Qualcomm facility. The city gave Thinfilm a grant to offset about $70,000 worth of its permitting costs, has been working with PG&E to help Thinfilm get the power lines for the plant upgraded and connected, and is helping to speed the inspection process, Liccardo said.

While the number of manufacturing jobs at the plant isn’t huge, they’re significant and symbolically important, he said.

“It’s important for us to keep a critical mass of technology manufacturing here in San Jose,” Liccardo said.

Troy Wolverton writes the Tech Files column and covers consumer technology as the personal technology columnist for the Bay Area News Group. Previously, he covered Apple and the consumer electronics industry. Earlier, he reported on technology, business and financial issues for TheStreet.com and CNET News.com.

The city’s lawsuit in a California court accuses Equifax of violating state law by failing to implement reasonable security measures and not providing timely notice of the breach. It seeks tens of millions of dollars in civil penalties as well as restitution for some consumers.